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23/2/2016
Latin America
Opportunities
Brazil’s
ChallengesOur StrategyOur Ambition
2000 2012
42%25%
34%38%
24%37%
2000 2012
41.7%
25.3%
34.4%
37.8%
23.9%36.9%
ABC
D
E
Source: Electrolux BMI, World Bank, IMF; CEPAL (Latin America Economic Association) - GDP per Capita of 18 Biggest Countries, and Euromonitor
Latin America is an attractive long-term market opportunity...Relevant major appliances... Large growing population... Improving social class...
3
Global major appliance ndustry (Sell-out)
Total of SEK 1,780bn
LA major appliance industry (Sell-out)
Latin America
~9%
2015 Basis SEKbn %
• Brazil 58 36%
• Mexico 26 16%
• Argentina 23 15%
• Chile 9 6%
• Andean 19 12%
• CA & Caribbean 19 12%
• Others 6 4%
160 100%
Large growing population
2015 Basis million
• Brazil 206
• Mexico 125
• Argentina 42
• Chile 18
• Andean 97
• Others 148
635
Improving social class migration
Market size in value - 2015 sell-in (SEKbn)
Source: Electrolux Planning and BMI Depts.
The key categories represents over 70% of total
major appliances industry in the region...
4
Food Preservation
(Refrigerators + Freezers)
Total
~32.5bn (31.1%)
Food Preparation
(Cookers + Microwave owens)
Fabric Care
(Washers + W&D)
Total
~25.1bn (24.0%)
Total
~23.4bn (22.4%)
Brazil
Mexico
Andean
Central America
& Caribbean
Chile
Argentina
2.9
4.8
6.2
1.7
3.4
13.5
2.3
3.0
4.2
1.1
1.8
12.7
1.6
4.9
5.8
1.5
2.1
7.641.7%
19.0%
14.8%
9.1%
10.4%
5.1%
50.7%
16.6%
11.9%
9.1%
7.3%
4.4%
32.4%
24.6%
20.9%
6.9%
8.8%
6.4%
Electrolux aims to be the #1 player in the region...
5
Be the #1 Player in Latin AmericaVision
Being the “Best” Appliance
company in the world measured...
…by our Customers
…by our Employees
…by our Shareholders
Our response
• Best in class products for all brands in major markets
• Leader in consumer satisfaction
• Top 3 brand in all market in Latin America
• Leader in key categories in major markets
• Leading employee engagement
• Sustainable earnings growth
• Lowest cost
• Lower asset base
• Leading high growth and margin segments
Sustainable profit growth for many years, but there is a
challenging short-term environment, mainly in Brazil…
6
2.4
18.8 18.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
2000 2015
-0.4
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8
3.2
2000 2015
10%
15%
20%
25%
30%
35%
40%
2000 2015
-0.5%
6.1%
2.5%
28%
15%
14%
2014 2014
-14bp2000-15
36%CAGR
2000-15
15%CAGR
2000-15
Net Sales(SEKbn)
EBIT(%)
NOWC(%)
In comparable basis
2014
(*) Source: Electrolux BMI Dept. & Euromonitor Sell-out Data
Continued growth in the region but Brazil is weakening...
7
In SEKm; comparable basis
1,651
12,914
11,396
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
22,978
66,944
57,571
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
730
6,5247,150
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
51,144
98,056
102,519
40,000
60,000
80,000
100,000
120,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
-12%
+10%
-14%Brazil Brazil
Other LA Other LA
CTI acquisition (2011)
CAGR: 13.7%
(2000-2015)
CAGR: 16.4%
(2000-2015)
CAGR: 6.3%
(2000-2015)
CAGR: 4.7%
(2000-2015)
+5%
Major Appliance Market (Value) * Electrolux Net sales
Sharp retraction in Brazil, partially offset by other countries...
8
2003 2015
Brazil
Other LA
EBIT
Source: Bloomberg, Focus Survey (BCB), JP Morgan, IMF and EIU (Economist Intelligence Unit)
Commodity prices affecting Latin America, with political
and economic consequences in Brazil…
9
68%
34%
17%
32%
Jan-14 Dec-14 Dec-15
Local currency devaluation
-0.2
-4.1-4.0
-1.0
2.1
-4.7
2.50.1
0.2
2009 2010 2011 2012 2013 2014 EX15 EX16
ChileMexico
Brazil
Argentina
Chile
Brazil
Argentina(Before new
Government)
Mexico
GDP %
Source: Bloomberg and Focus Survey (BCB)
Most economic indicators in Brazil are unfavorable...
10
109
75
60
70
80
90
100
110
120
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Dec-15
14.25%
11%
-1%
2%
5%
8%
11%
14%
17%
Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Dec-15
Accumulated in 12 months
484
~ -1,500
-1600
-1200
-800
-400
0
400
800
1200
Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15
Inflation (IPCA)
Interest Rate (Selic)
6.8% 8.4%
101.9
89.085
90
95
100
105
Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Dec-15
Thousands
-12.4%
Dec-15 (EX)
Consumer Confidence Index... Higher inflation and interest rate...
Higher unemployment rate...
Brazilian net creation of formal job
(‘000 individual jobs) - Rolling 12 months
Industrial Production Evolution Index...
Rolling 12 Months
Source: Electrolux estimates
The appliances industry also affected by credit restriction
and high interest rates...
11
In SEKm
2015
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Change in % vs. PY
2014
Volume by quarter
Market sell-out volume in Brazil (T3)
-6%
-8%
2013 2014 2015
-15%
The appliance industry forces have changed in Brazil...
12
Major
Appliances
Brazil
Main Suppliers
• Foreign suppliers
• Domestic suppliers
USD impact
Affected by automotive
industry & other
• Leaders (all categories)
– Whirlpool
– Electrolux
• New Comers
(washers & split A/C)
– Koreans
• Niche (first price domestic)
– Atlas
– Muller
– Esmaltec
− Price pressure from retailers
− Profitability eroded
− Low prices to enter the market
− Not profitable
− Expanding with
consumer downtrade
− Not profitable
Competitors Retailers
− Changed CEOs in last 6 months
− Significant negative results (worst
in history, accumulating SEK
~200m in Q315)
− Volume 20% to 30% down
− Low prices to mkt. + promotions
− OK, but not profitable
− From double digit to single digit
growth - no profit
− Electrolux: E-store (high
profitability & growth)
− OK
− Lower margin
− 3 “Chapter 11” cases
• Downgrade in price points
• High level of idle capacity deteriorate conversion /
absorption cost (high level of fixed cost)
• Re-introduction of 1st price cycle defrost products
• Lower volume of imported products
• Enhance export activities
Products
• Top3 (~55%)
– GPA
– Mluiza
– MdV
• Hypermarkets (~8%)
• Solid Medium (~5%)
– Fast Shop
– Lojas Cem
• Small (~14%)
• E-comm (~18%)– Mabe (filed for
Bankruptcy on
February 10th, 2016)
How to set-up short-term challenges and prepare
for future growth…
13
Maximize
Cash Flow
Product Cost Optimization
• Suppliers negotiation
• Scale optimization
• Streamlining
Capacity Adjustments
• Plant re-configuration
– Optimization
product lines
S&OP
• Channel inventory management
• Distribution (stock-out avoidance)
• Price increases (to mitigate significant currency headwinds)
• Profitability & Cost to Serve management - customer &
product mix
Cost Reduction / Asset Management
• Complexity reduction (SKUs, internal processes etc.)
• Cost reduction plan (Overhead and SG&A, >20% in headcount reduction)
• CAPEX optimization
• NOWC improvement
We trust in our Best in Class strategy...
14
• Scale in production
and purchasing
• Low costs together
with value product
design
• Product cost
• SG&A
• NOWC
• Group synergies
• Modularization 2.0
• Strong talent pools
in business critical
functions
• Transform HR
towards Business
• High performing
organization
• Development of
consumer based on
differentiation
• Best in Class
products & services
and POS
• Brand strengths
• Sustainability
• Customer and
product mix
improvement
• Direct sales and
new channels
• Digital, digital,
digital
• Adjacent products
• Acquisitions
Innovation based on consumer insight,
driving profitable growth...
15
• Xxxx
– Xxxx
– Xxxx
– Xxxx
– Xxxx
• Xxxx
• Xxxx
The Innovation Triangle Positioning
Profit Consumer
Benefit
Speed
18 to 12
Months
Focus
Alignment
70% Consumer
Preference
(We talked with
more than 7,000
consumers in 2015)
R&D
DesignProduct
Marketing
Price
Ability to
Extract
Value
Consumer Value
Differentiation
Feature Value > 3x Cost
All projects above 70% consumer rate...
16
94% 96% 83%
Steam
Cooker
I-Kitchen
Line Extension
TL Washer
& Dryer
95%
Infinity
I-Kitchen
Consumer preference
3R prototyping culture...
17
Rough, Rapid and Right 18 months from draft to launchingNew target
12 months
PrototypingInvestment
Concept & Design Testing
FinalProduct
LineExtension
Quality market share improvement based
on product launches...
18
Brazilian Case
...reaching 100 product launches per year
Recognition... Design Awards...
19
Visual brand language aligned across the region in all
products...few brands
20
Super Premium
Statement
Performance
Core
Brazil
Mexico
CA & Caribbean Andean Chile Argentina
Visual Brand
Language
Levels
Prod.
Class.
Pre
miu
mB
est in
Cla
ss
Ma
ss
Be
st in
Cla
ss
Meaningful
Experience
Pleasurable
Sense
Convenient
Usability
Electrolux i-Kitchen...
21
Top Load W&D with Wi-Fi...
22
Mini Silent − Washer...
23
NewHome Pro Line
24
SIDE BY SIDE – HOME PRO REFRIGERATOR
SH90X
Blue Touch Panel
2 HortiVita drawers: preserves nutrients
HomeBar
"Counter Depth"
546L total capacity
- 370L Refrigerator
- 176L Freezer
External water and ice dispenser
Ice cubes or crushed
Indoor lighting with LEDs
Can express holder
Dairy holder with lid
Egg basket
Ice cream basket
Turbo cooling
Turbo freezing
Dimensions (mm):H 1770 X W 906 X D 747
25
HOME PRO DISHWASHER
LF14X
Blue Touch Panel
Opti-One Function: select one of the
baskets to wash
Intelligent Function: selects the best
program to wash
14 Sets
Third rack
Sterilize Function: 70ºC wash program
Washing functions: Acquajet (Pre-
rinse), Express 30 ', Fine, Normal, Pots
and postpone.
Front and interior in stainless steel:
more durability and ease of cleaning.
External handle: more firmly and
securely to handle the product..
Built-in or Freestanding installation
Dimensions (mm):H 845 X W 608 X D 638
26
HOME PRO BUILT IN ELECTRIC OVEN
OE9ST
Blue Touch Panel
80L capacity
Cooking by convection and ventilation
12 pre-programmed functions
9 pre-programmed recipes
Triple Glass Door
Side opening door
"Timer" and "Panel Lock" functions
EasyClean coating and enameled fat catch tray
Guide shelves and removable door
Dimensions (mm): H 595 X W 595 X D 575 27
NEW ELECTROLUX HOME PRO LINE
28
Differentiated model in key account management...
29
(*) Top 3 Categories: Food Preservation, Food Preparation Cooker and Fabric Care
Winning the point of sales floor share battle...
30
Note: 2015 FY Basis
Leading customer service satisfaction...
31
Focus on retaining existing consumers and build
brand loyalty through differentiated service
Learning process about consumers...
Focus
Groups
Benchmarking
Reference
Field
Experience
Mystery
Client
Satisfaction
Survey
Service
Innovation
Listen to Consumers
and Retailers needs
Continuous focus on best practices
to self-assessment and improvements
Visit different market segments to share experiences with service team
Real attendance
simulation to measure quality
of service
Monitor consumer
satisfaction
TopService
Leading customer service satisfaction...
32
The modern consumer magazine award
20122014
2013 2015
Deliver a remarkable consumer digital experience...
33
Consumer Experience Social Media E-commerceE-retailers
The main idea is to provide the right and best content for consumers, increasing brand
awareness and consideration
The Digital Experience…
Deliver a remarkable consumer digital experience...
34
PRE PURCHASE
• Create and source content and distribute it through owned and 3rd party
channels to be more pervasive and increase funnel
AT PURCHASE
• Evolve Digital Commerce
into a best-in-class
experience
• Enhance the shopping
experience optimizing
product selection online,
on mobile and in stores
matching local needsACROSS
• Digital Culture
• Develop Organization Capabilities and Collaboration
• Connected Appliances: Deliver real benefits to consumers with engaging
content through relevant Apps, that also could drive ACS sales
• Technology
• Adoption and integration of tools and standards (e.g.: PIM)
POST PURCHASE
• Create a valuable
ownership experience
immediately post
purchase as well as
longer term CRM
Conclusions
35
• Latin America is an attractive long-term market opportunity...
• Electrolux is a relevant player in the region, leading 3 out of 4 main markets...
• Sustainable profit growth for many years, but there is a challenging
short-term environment, mainly in Brazil...
• Continued growth in other Latin American countries...
• Actions to take cost and to increase prices to mitigate currency headwinds
• Electrolux aims to be #1 player in the region...
